The unemployment rate in construction was 13.1 percent, not seasonally adjusted, down from 18.8 percent a year earlier. (BLS does not adjust industry rates.) The drop in industry unemployment, unaccompanied by a rise in construction employment, suggests workers are finding jobs in other industries, retiring, returning to school or training, or leaving the workforce. That may make hiring more difficult when construction demand picks up.
Construction spending increased 0.8 percent in October to $799 billion at a seasonally adjusted annual rate, the third straight monthly gain, the Census Bureau reported Dec. 1. Totals were revised up for September by $5 billion (0.6 percent) and for August by $4 billion (0.4 percent). The October total was $36 billion (4.7 percent) higher than the low point in March but remained 0.4 percent lower than a year ago.
As in recent months, public construction shrank (-1.8 percent for the month, -9.4 percent over 12 months) while there were gains for private nonresidential (1.3 percent and 8.4 percent, respectively) and residential construction (3.4 percent, 1.7 percent). The largest private nonresidential segment also had the largest monthly and annual gains: private power construction (including power plants, renewable, transmission, oil and gas fields and pipelines), 5.8 percent and 18 percent. Next in size, commercial construction (retail, warehouse and farm) grew 0.4 percent and 12 percent, followed by manufacturing, -0.4 percent and 14 percent.
New single-family construction was up 0.6 percent and 1 percent; new multifamily fell 0.8 percent for the month but rose 6.7 percent for the year. The largest public categories were highways, -0.4 percent and -8.3 percent, and public educational spending, -1.8 percent and +0.6 percent.
The value of nonresidential construction starts “rebounded 14 percent in October from September’s 21 percent drop,” while year-to-date starts for the first 10 months of 2011 combined rose 10 percent from the same period in 2010, Reed Construction Data reported Nov. 23, based on data it collected. Year-to-date commercial starts climbed 13 percent, including a 15 percent gain for retail and 56 percent leap for office starts. Industrial building starts doubled year-to-date. Institutional building starts climbed 12 percent, with medical facilities jumping 23 percent year-to-date. Heavy engineering starts rose 4.8 percent year-to-date.
Beige Book“Overall economic activity increased at a slow to moderate pace since the previous report across all Federal Reserve districts except St. Louis, which reported a decline in economic activity,” the Fed stated Nov. 30 in the latest Beige Book, an informal summary of business conditions in October through mid-November in the 12 Fed districts, which are referenced by their headquarters cities. “Single-family home construction was weak and commercial construction was slow….For construction-related goods, Chicago and Minneapolis reported declining demand, while Dallas said demand was stable. Overall, St. Louis saw more plant closures than plant openings or expansions.
“Residential construction remained sluggish. Single-family home construction remained weak, while multifamily construction picked up in New York, Philadelphia, Cleveland, Chicago and Minneapolis. San Francisco remained ‘anemic,’ while St. Louis and Kansas City reported decreased activity….Commercial construction was somewhat mixed. Cleveland saw steady to slowly improving commercial construction; Chicago and Minneapolis experienced modest to moderate increases. New York and Philadelphia noted generally weak conditions; Richmond and St. Louis reported slow activity, although industrial construction picked up….Minneapolis reported that more wind energy projects were planned.”
States' Fiscal PictureThe Fiscal Survey of States, released Nov. 29 by the National Association of State Budget Officers and the National Governors Association, “demonstrates the precarious financial situation facing states. In 2012, states appear on track for continued, at least moderate, financial improvement…[However,] the growth in revenue collections is not improving significantly enough to cover both the wind-down of Recovery Act funds and the increased expenses states face in areas like health care and corrections….Forty-three states enacted budgets with increasing general fund expenditures for fiscal 2012 compared to fiscal 2011. However, even with these proposed increases, 29 states would still have lower general fund spending in fiscal 2012 compared to the pre-recession levels of fiscal 2008.”
In addition, “‘Local governments are still seeing declines in their revenues, because even if property values have stabilized, property taxes tend to follow a couple years behind,’ said Dan Crippen, the NGA’s executive director, the Washington Post reported Nov. 29. “Property taxes are coming in much lower for school districts and cities and counties.” Falling property tax receipts imply less funding for school and municipal construction.
Property values are stable at best, at least for houses sold or refinanced with mortgages acquired by Freddie Mac or Fannie Mae, the Federal Housing Finance Agency reported Nov. 29. The agency’s house price index rose 0.2 percent, seasonally adjusted, from the second quarter to the third quarter but fell 3.7 percent from a year earlier. There were year-over-year increases in only four states (North Dakota, 5.4 percent; Wyoming, 2.9 percent; Iowa, 1.3 percent; and Nebraska, 0.55 percent) and 18 out of 306 metro areas, led by Bismarck, N.D. (5.5 percent) and Dubuque, Iowa (2.5 percent). The steepest declines among states were in Nevada (-12.3 percent) and Arizona (-12.0 percent); among metros, in Las Vegas-Paradise (-15.1 percent) and Ocala, Florida (-14.6 percent).